International Accounting Reporting Final Acc 641

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a – Uniforming accounting standards will help reduce the accounting diversity and consequently reduce the costs imposed by accounting diversity.  Also it’s needed due to the rapid growth in the international capital market and the increase of cross border financing. It’s important to produce comparable and credible date for use across the borders. Also to have more foreign investments interested in the country’s stocks exchange as unifying the reporting standards will attract foreign companies. Finally there is an argument that adopting IFRS is a low cost option for developing countries as they lack the time and resources to devise accounting from scratch.

The disadvantages:  There would be an integration problems as converting from GAAP to IFRS would be very complex and required a lot of changes. Also, opinions stated that it’s neither nether practical nor valuable given the institutional impediments in the standers setting process.  Also a well-developed investment market already exist and Investors can make investment decision without the presence of International accounting standards and they can spend the time and money to analyses investment opportunities and focus on real economic results. Finally, small businesses will not be able to afford the high costs of the integration and only multinational companies will benefit and have a higher competitive advantage.

b – Each country has different economic and political differences and adopting IFRS may result in neglecting whether these standards are suitable for all economies. On the other hand investors may not be able to compare the financial reports so this market becomes risky to them.  As a result they may direct their finances to less efficient but less risky economies. Also, Developing country may face accounting colonialism by developed countries regardless if these standards are suitable for developing counties or not. One more factor is the absence of of strong professional accountints in a number of coutries. But this can by faces by enforcing the IFRS by the capital market regulator in each country.

C – As stated before, the comple integration will not allow countries to apply all the IFRS as this will require fundamental changes in the accounting system.

2 – First of all, if the staff has enough experience to generate reliable financial statements then making them start new reporting system will cost money and time as accountants have to monitor, report and comply the domestic firm reporting with the IFRS. Developing market already exists and investors make financial decision based on the country’s financial system as International reporting may not reflect the country’s real economic status as IFRS deals also with operation and management which is different than each countries operational and managerial style. Also, by applying both standards, investors will have more clear vision when making financial decisions as IFRS differs in dealing with Tax rules, Assets and liability calculations. IFRS may not be the most appropriate accounting standards as each country has different economic, political, legal and environmental circumstances.

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